Bankruptcy, What It Cannot Do

While bankruptcy can offer relief for debtors from the activity of creditors, remove some consumer debts or lead to the development of a repayment plan for those debts that must be resolved, at some point leading to a discharge, there are some things bankruptcy cannot do.

Bankruptcy will not protect the debtor from creditor's claims if not disclosed to the bankruptcy court at filling. Therefore, the debtor needs to be certain to produce a full disclosure of every single one of the creditors however time intensive this can be.

When filing chapter 7, it offers some protection but not a complete fix all solution, as it is an approach that will cause the liquidation of assets to make good on secured debts. Nevertheless, exceptions can be achieved together with the support of the court and creditors. Chapter 7 is not able to completely shield the debtor coming from the claims of creditors. Even with discharge, objections can be filed within the court within the deadline period by creditors or the trustee in the case if troubles linked to disclosure or some sort of irregularity can be proven.

If a creditor has a lien on a property and wants to repossess the property because of a secured debt, bankruptcy cannot shield you from this. Foreclosures are stopped by Chapter 13, although the debtor must prepare a repayment plan that enables payments to be made to the existing mortgage and catch ups on payments not made previously. In order to do this the debtor is required to give proof of regular income.

If you have a business that is barely getting by bankruptcy cannot provide a quick and easy fix. Based on the size of the business, small businesses is the exception, a chapter 11 approach to bankruptcy may take up to eighteen months to file and make a repayment plan. An attorney is strongly recommended along with other professionals could be involved. Expenses will have to be paid at intervals even during the process of filing and preparing the plan.

Most of the time, certain classes of debt bankruptcy cannot reduce or eliminate. For instance, personal debts such as child support, spousal support or alimony are not resolved when discharge occurs and the debtor remains liable for the repayment of these debts. Additionally, these payments must be part of a repayment plan under chapter 13, and this may lead to the plan having to entail the longer period of five, as opposed to three years.

Various other debts, for instance fines owed to municipal or government bodies, or fines of a criminal nature cannot be discharged. Nor can debts linked to harming or killing a person while intoxicated be discharged from filing bankruptcy. In addition, debts regarding fraud remain even after other debts are discharged.

In most cases, tax debts cannot be eliminated. When this has been done, it has been a complicated, prolonged and costly process usually related to old tax debts.

Under most circumstances student loans cannot be discharged from the Bankruptcy Code, although it is possible to plead hardship. However, this is not necessarily granted because it is required that the debtor proves inability to pay now and in the future.

These potential limiitations should be considered by debtors for debt reduction as they file with the bankruptcy court.

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